Sri Lankan banks appear to have come on top amongst all stockmarket listed firms with the release of corporate results for the last quarter with most corporates performing below expectations, stock analysts say.
Banks are expected to continue on this trend in the next quarter as well. "Interest income for the first half of this year in some banks will be higher, because their capital gains made in the bond market will be higher,” an analyst noted.
He said they will (as displayed in the last quarter) see large gains in foreign exchange income as well. "The rupee has depreciated faster than the US dollar. Therefore income will be displayed for the first half of 2009," he added.
He said banks' net interest margins are widening because they have re-priced their liabilities (deposits) faster than their assets (loans) in a declining interest rate scenario.
However, he noted that their portfolio quality is not up to the mark and that the level of provisioning for their non performing loans are rising which requires increased provisioning for bad debts.
Another analyst noted that small scale players seem to be better positioned to make use of their lean organisational structures and centralised operations during times of economic downturns.
“Even at a time when most businesses are holding onto their expansions mainly funded by credit, banks have performed relatively well and have maintained a constant dividend policy,” the second analyst added.
He also noted that the banking sector shares could continue to attract investor attention with the expected improvement in quarterly financial results. “Banking sector shares NDB and Sampath was seen contributing significantly to turnover in the market,” he said, adding that the Sampath share price has increased substantially since March. “Most banks’ impressive quarterly results seem to have attracted investors.”
He said the Central Bank has informed the licensed banks to take appropriate measures to reduce interest rates charged from their customers which will see companies’ repayment capacities improved. “This will facilitate more corporate borrowings,” he said. |
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